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Cash flow statement of Wesfarmers Limited

   

Added on  2020-05-28

7 Pages2081 Words91 Views
Running head: MANAGEMENT ACCOUNTINGManagement accountingName of the studentName of the universityAuthor note
Cash flow statement of Wesfarmers Limited_1
1MANAGEMENT ACCOUNTINGTable of Contents1.Methods used for presentation of cash flow statement.......................................................21.Cash flows from different activities....................................................................................32.Analysis of cash flow..........................................................................................................43.Conclusion and recommendation........................................................................................5Reference....................................................................................................................................6
Cash flow statement of Wesfarmers Limited_2
2MANAGEMENT ACCOUNTINGWesfarmers Limited is the Australian conglomerate that has it’s headquarter in Perthand they carry on their business mainly in Australia and New Zealand. Their main productsand services are coal mining, fertilizers, chemicals, retails and safety products. It is growninto the biggest listed companies of Australia. Each of their diverse businesses is responsiblefor daily operations and each business has their own team for human resource(Wesfarmers.com.au, 2018). On the other hand, Woolworth supermarket is the Australiangrocery or supermarket store chain that is owned by the Woolworths Limited. AfterWesfarmers they are the 2nd biggest company in terms of revenue (Woolworths.com.au,2018). 1.Methods used for presentation of cash flow statementUnder financial accounting, the cash flow statement is the financial statement thatstates the changes in the cash balance and generation of cash from various activities likeoperating activities, financing activities and investing activities. Cash flow statement can beprepared using direct method or indirect method (Bhandari & Iyer, 2013). The cash flow hasthree sections for three activities that are the operating activities, investing activities andfinancing activities. Under the direct method, cash flows are listed under the operatingactivities. The cash flows from the operating activities are generated from collection fromcustomers and payment made to employees, suppliers and others. This section also includesthe payment made towards interest and income tax. On the other hand, under the indirectmethod, net incomes are adjusted to convert it to the cash basis from the accrual basis(Pavlović & Bogdanović, 2013). It requires adding back the non-cash expenses likeamortization, depreciation, provision of loss for accounts receivables and the losses selling offixed assets. The net income is also adjusted for the changes in the account balances in thecurrent assts where the cash and current liabilities are excluded for that period between thestarting account balance and ending account balance. Looking into the cash flow statement of Wesfarmers it has been identified that thecompany uses direct method for preparing their cash flow statement. The company reportedappropriate reconciliation under the Note 4 – Cash and cash equivalents. Further, under thereconciliation the company stated the reconciliation of the net profit after tax with the netcash flows from the operations (Wesfarmers.com.au, 2018). As per the reconciliation, non-cash items like impairment, depreciation, gain on disposal has been adjusted to the amount ofthe net profit and thereafter the increase or decrease in assets and liabilities has been adjusted
Cash flow statement of Wesfarmers Limited_3

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